Used Vehicle Prices Spike to New Crazy Record in a Market Gone Nuts

Not “temporary” yet.

By Wolf Richter for WOLF STREET.

Used vehicle wholesale prices spiked 5.3% in September from August, to a new record, according to Manheim this morning, the largest auto auction operator in the US and a unit of Cox Automotive. This spike in the Used Vehicle Value Index more than wiped out three months in a row of declines that had spread false hopes that the used vehicle craziness would finally abate.

The index is now up 27% from September last year when this craziness was already well underway. And it formed a record two-year spike of 46.4% from September 2019.

The sales conversion rate at the auctions rose throughout September and in the last week of September surpassed 66% compared to 52% in September 2019 as dealers were more aggressive at buying vehicles. This, according to Manheim, indicates that wholesale demand will likely remain strong through October:

In dollars and cents: Over the first nine months of the year, the average resale value of a one-year old vehicle jumped by 25%, or by $7,759, according to Cox Automotive. This is the fabled situation where buyers can end up paying more for a one-year old used vehicle than those vehicles might have cost new. But the new vehicles are in short supply or require long waits, and their prices have spiked too.

Used vehicle retail sales in September fell 10% year-over-year to a seasonally adjusted annual rate of 19.5 million vehicles, according to Cox Automotive estimates.

Supply was tight, but not nearly as catastrophic as with new vehicles. Normal supply for used retail is about 44 days of sales. In September used retail supply was 37 days. Wholesales supply, which normally is 23 days, was 18 days. So tight supply, but not a “shortage,” a phenomenon that new-vehicle buyers are facing.

The low supply is a result of sharp decline in sales at auctions by the three largest categories of sellers in the wholesale market, according to the quarterly presentation by Cox Automotive today. The percentages are compared to normal September levels:

  • Rental vehicles: -40%. Rental fleets have trouble getting new units due to the new vehicle shortage and are keeping their old units longer.
  • Off-lease vehicles: -15%. High used vehicle prices generate high equity positions that keep off-lease vehicles from being sold at auction.
  • Repo companies selling repos: -33%, as the repo rate remains near record lows (consumers are flush with cash from all the stimulus and unemployment programs).

When the rental car business – particularly the airport rentals – froze up in the spring of 2020, it started a chain reaction that spiraled into the used-vehicle market and can be seen in the average mileage of rental vehicles sold at auction.

Rental fleets operate vehicles under two programs: one, a deal under which they sell their units back to the automaker, and the automaker is at risk for the resale value; and two, where rental fleets sell the vehicles on their own and take the risk of the resale value.

The average miles of these “rental risk” units had spiked to 88,000 miles by May 2021 and stayed near there for three months. But in August, the average miles plunged, and in September it plunged again, to 56,611 miles, but still up 33% year-over-year.

I also saw from what the rental fleets’ own retail outlets advertised on the internet and in my inbox that many of their lower-mileage cream puffs ended up on their own retail lots (chart via Cox Automotive):

The average price of these “rental risk” units sold at auction in September jumped by 37% year-over-year, according to Cox Automotive, compared to a 27% spike of the overall Used Vehicle Value Index. These are just crazy numbers.

And these crazy numbers are particularly astounding since a vehicle is for most people a discretionary purchase: most people can keep driving what they have for a few more months, or a few more years, and they don’t have to buy today at these crazy prices. People have proven that they can do this when sales collapsed during the Financial Crisis and then stayed down.

But people are not doing it now. They’re flush with cash from all the stimulus and cash-out mortgage refis, and from newly found wealth from the Fed’s “Wealth Effect,” and since it was free money, it doesn’t matter anymore what they spend for a vehicle. And so people pay whatever. And dealers have figured this out too, and they’re scrambling to buy inventory, outbidding each other, and they’re confident that they can pass on those prices plus some to their customers, and they’re doing it and making record gross profits along the way.

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  126 comments for “Used Vehicle Prices Spike to New Crazy Record in a Market Gone Nuts

  1. Peanut Gallery says:

    I wonder how long it will take before all the “free money” dries up… I’d really like for all this madness to stop

    • Harrold says:

      Its October already, the ‘free money’ is long gone.

      • gametv says:

        The free money is not even close to long gone. Part of the free money is the increase in real estate values and the stock market. When people see that their net worth has increased by 200K on paper, they think they are rich.

        Bank balances are still high and credit balances low, so there will continue to be plenty of consumer buying support for the next couple months. A correction in equity and bond markets and a fall in real estate prices is what is needed to take consumer demand back down. My guess is the wheels fall off by Feb-April of next year. The Republicans would love to see it happen right before mid-term elections. My guess is that democrats get slaughtered in the mid-term elections and we then have a split government.

        • Harrold says:

          Most people don’t own stocks and those increased house prices come with increased property and insurance costs.

      • Joe Saba says:

        I see paper tags daily
        seems better than 10% traffic in my town
        saw dealer had USED RAM 1500 for just $67k
        his lot across road was 3/4 empty of smaller cheaper stuff
        I’m willing to sell my big truck for 20% more than I paid in january
        figure I can get 2 nice vehicles

      • Patrick says:

        CA is rolling out another state-wide stimulus (includes giving it to “undocumented” persons.

    • jon says:

      It’s gonna take few months for this/wealth effect due to free money to wear down.

      • Masked Ghost says:

        Where do I go to get in line for all of the “free money” that people here are always talking about ?

        • cas127 says:

          Come and gone.

        • Augustus Frost says:

          Stimulus checks, additional unemployment payments, renter eviction moratoriums, mortgage forbearance, PPP loans, and increased refundable tax credits. Most but not all of it has expired.

        • historicus says:

          Become an entity that can borrow at the levels the Federal Govt does… .05%

      • Apple says:

        Poor spend their money as quick as it comes in. Only the wealthy save it up to buy SUVs.

        • Poor like you says:

          The prices of goods don’t usually change between poor and rich. Just what you can afford to buy. A poor person buying a new SUV will be paying for 5 years, at a substantial percentage of their annual income. A rich person will pay whatever they want, whenever they want. That’s the difference.

        • Joe Saba says:

          new loan is avg 78 months
          payment still same just couple years more

    • The Real Tony says:

      The reason for inflation was people who didn’t need money got money anyway. Up in Canada no one who didn’t need money got money. Everyone in Canada is broke not flush with cash.

      • Truckman says:

        True.
        My local two-man garage is giving credit to regular customers – pay over six months, no interest. Whilst I was round there yesterday, 2 out of every 3 customers were using it. That was 1 in 20 last year.
        Meanwhile, nobody wants to work for minimum wage. The basic problem appears to be that with most places not offering full time work, it simply isn’t worth the gas to travel for a 4 hour shift. A further problem is Covid restrictions. The unvaccinated are either excluded or not prepared to do the testing rigmarole, and quite a few of the vaacinated are still unwilling to take a job with lots of public contact.
        So, people are spending less and not working, and nursing their existing vehicles.

      • Paulo says:

        Tony, not even close. Time to smile, man.

        For example, in my world of 100-200 people the only people I know who are broke are a young couple down the road from me who both drink and smoke and don’t pick up any extra shifts. I know only one small business owner who picked up assistance, and he runs a dojo with too small floor space. My kids are doing fine, as is all of their friends. All of them. When I drive to town there is a job board huge sign posted at the marshalling yard/shop of a major forest company. Wanted: log truck drivers, yarding crew, HD mechanics, dozer boat operators, scalers, etc. These are all 150K per year jobs. My broke neighbour just left for work at 6:00am this morning for his 150K job running equipment on a dryland sort. (He needs a new muffler).

        Two headlines for perusal:

        Another disappointment: US economy adds only 194,000 jobs in September

        and:
        157,000 new jobs in September gets Canada’s economy back above pre-pandemic level

        (12% of the US population)

        The shop where I take my Westie for specialty service has never ever been busier after the initial pandemic lockdown 18 months ago. Automotive service centers now have 1-3 week waits to book in a vehicle. Construction crews up to two years for getting that ‘good contractor’.

        I don’t know where you live but you are definitely in a depressed region that is colouring your entire view of Canada. My son’s employer in Alberta is short people (skilled trades). There is mucho work for those who get some training and show initiative. Sure, it isn’t like the late 60s and 70s for unskilled labouring, but there is lots and lots of work out there in the western provinces for sure.

        One more thing. I don’t need money….my friends don’t need money, and none of us got any. :-)

        • Truckman says:

          The basic problem is in your statement – skilled trades. Most of the big shortage jobs require certification. It isn’t cheap and can take years, the government won’t admit that the programs are bloated with admin and far more expensive than they need to be, and employers won’t stump up and invest in apprentices.
          More the self-investor, if they’ve got the money, there’s no job guarantee at the end of the training. Furthermore, when the boom ends, it will be last in, first out.
          Then we’ll also add that immigrants largely can’t get any credit or recognition for those certificates they had in their original countries, and even if they can it’s an admin nightmare. And this applies to countries like the UK and Germany just as much as Africa.
          Employers could fill their vacancies in a year if they invested in nominally unskilled workers (who may in fact have years of experience and certification in another country), and paid for their Canadian training. But they won’t. They are playing chicken with the Government, hoping the Government will crack and either the taxpayer will fund the training or they’ll allow more slave workers in. Same in most countries.

        • Anthony A. says:

          Thanks for letting us know how great things are going in Canada. we don’t get to read much about “Utopia” in our newspapers. I’ll have to pass your story along to my retired Canadian neighbors who got their US citizenship last year.

        • VintageVNvet says:

          Actually this is for P and T:
          Remember very well when I went to SF to apply to the carpenters union there:
          The answer at first was, ”We don’t see your grandfathers name on our Union roll.”
          After that rebuff, and in spite of it, I tried again with some references in hand from licensed contractors I had worked for, and similar response.
          OK, so I got my own CA GC license, and hired many ”union” guys who all told me they LOVED working for me because I paid them more than the union, in CASH, including cash allowances for several needed stuff, like, for instance, medical, tools, transportation, life insurance, etc.
          Loved the union guys because they were very well trained, but, at least in those days, union was NOT a good deal for those willing able and ready to work.

        • topcat says:

          log truck drivers, yarding crew, HD mechanics, dozer boat operators, scalers…..150K for these jobs? You are kidding right?

    • historicus says:

      Its not a matter of what things are worth anymore…

      Its a matter of WHAT IS MONEY WORTH?

      And right now, the Fed has created a situation where money is a wasting asset at over 5% a year……and they dont lift a finger?

      Savers are punished, and those who spend fastest win…
      Bottlenecks in shipping are a RESULT of inflationary fears, not some logistical incident.
      Buying agents say to importers…”Get me all you can at that price” for they know that next month it will be more costly.
      This is inflation.
      This is why the Fed is mandated to stable prices…..
      This is the craziness you get when the inflation “dog” gets off the leash..
      This is why the Fed is completely rogue and off the rails…
      Where is the outrage?

      • COWG says:

        h,

        Try this:

        “FEDERAL RESERVE STEALS MONEY FROM BRITNEY”

        Pop star incensed about legal theft of her money and stunned she can’t get it back ! “

        That’ll crank up the outrage meter….

    • BeepBeep says:

      With the chip shortages and supply chain disruptions etc, used is all they can get to, it’s already there and ready. If the new cars were available they’d be selling better than they currently are.

  2. Sams says:

    Prices are up, but what with numbers and type mix?
    Has there been changes in the mix of used cars like on new cars where there has been a shift to expensive “high spec” vehicles?

  3. Truckman says:

    Round here, the prices are only up for vehicles with low mileage/less than 6 years old. Anything older with mileage over 150,000 miles is similar to last year.
    I would guess the used price is up for those vehicles being bought by people who wanted new, but there’s none available.
    Older vehicles are being kept going with whatever spares are available. Non-main dealer garages are being very generous with passing Inspections, with the tacit approval by Government (though it probably isn’t official). The police seem to be letting a lot of stuff slide, except DUI.

    • Harrold says:

      Not sure what state you are in, but in Texas police are in full revenue generation mode.

      • Truckman says:

        Ah, sorry.
        I am in Canada.
        We generally have nice Mounties. And they don’t get a cut of the fines round here, which is probably a major factor. A second major factor is that they are undermanned, and Covid restrictions have made it easier to spot and catch drug dealers, so they’ve been mostly busy with that.

        • MCH says:

          Oh no… that reads like the Canadians are waging that failed war on drugs that mostly target ***** and ***** people. That’s not very nice of the Mounties.

      • Michael Sterling Vaughan says:

        isnt that illegal? The police are not allowed to generate revenue….This should be reviewed.. We have shut down (speed traps) in Colorado by challenging these small towns revenue streams.

        • Escierto says:

          Illegal? Maybe in Colorado but in Texas what is illegal is whatever a cop says is illegal. Speed traps and holdups abound.

        • Anthony A. says:

          Have you got any legitimate examples of this? That’s not been my experience after living in Texas for 30 years now.

        • SwissBrit says:

          It’s obviously a huge conflict of interest for the police to benefit in any way from the fines that they dish out – ‘Come on lads, the Chief needs a new cruiser, let’s go find someone to fine to pay for it’ etc.

        • Harrold says:

          Google “fort worth district attorney asset forfeiture”.

          Tarrant County District Attorney’s office generates about 10% of its budget that way. The narcotics unit pretty much funds itself.

        • VintageVNvet says:

          Oh C’mon folks:
          Every constant driver in every place in USA knows full well to drive more carefully, especially with regards the speed limits toward the end of the month…
          Cause every municipality with the ability to do so has ALWAYS had ”quotas” for the various and sundry tickets that can be cited to make money.
          E may not have certifiable reports because it is certifiable that none exist on paper or ever have.

    • endeavor says:

      If dealers buy a leased vehicle from an owner, before the lease is up, that is a used vehicle sale. They are buying more than ever before, cutting out the auction houses. However, it drives up the prices on the remaining lease turn in’s that make it to auction so the auction houses are making higher grosses. It’s an auto inflation machine.

    • Ron says:

      In Midwest I’m a truck driver used lots full maybe prices are to high Omaha Sioux City Lincoln Des Moines hate to be the guy holding the bag haha

    • William Flyer says:

      What do mechanics make now….$50-80 bucks an hour,
      plus parts? Whatever. The American public is NEV ER going to accept mandated electric cars.

  4. Frankenstien says:

    A relative just totaled out their minivan and thought the insurance company gave them a pretty decent payout for it. Until, that is, they started shopping for a replacement. They really don’t want a brand new vehicle as they know their kids will not be kind to it, but the prices they are finding on used minivans are so high they may end up getting a new one anyway.

  5. DawnsEarlyLight says:

    I wish prices would come down at least a little. I need to buy a golf cart, to replace my F150. 😎

  6. Yort says:

    Great opportunity to move your old autos that you don’t use very much right now, as at some point all that free money runs out and people will be questioning the their FOMO purchases…

    The free money mania won’t take long to flush out of the system at this rate of burn if services like work provided healthcare keeps increasing at 8% per year, as 8% of a big number is a “big number”. An 8% increase on a loaf of bread is one thing, 8% increase on $20,000 quite another!

    Per CNBC today:

    The typical family of four covered by a workplace health plan is expected to see costs rise 8% this year versus 2020, according to a Milliman medical index.

    • Yort says:

      “Hellcare Slaves” seems fitting for what we have in America right now. I have a good friend who sold a very successful software company for millions and retired at age 38, and he was afraid to go to an out of state hospital when sick on vacation in California recently. What a mess we have created when the American Hellcare system was allowed to become corporatized with profits at all costs…very “sick” indeed…

      Forgot to add this from CNBC:

      Four in 10 of the respondents whose health costs increased have had trouble paying bills or covering basic living expenses, according to the poll. That share is up from 29% in 2020.

      • Michael Gorback says:

        At some point when I can surface for air I’ll delve into the surprise billing and transparency legislation. At the moment I’m busy juggling chainsaws.

        • Yort says:

          I look forward to it! Just running some simple numbers, the current $29,000 family of four HellCare insurance costs for 2021 will be exactly $36,500 if they keep raising 8% over the next three years.

          $36,500 is $100 dollars a day for 365 days a year! for service you may or may not use. Does that seem reasonable or sustainable for anyone except the top 1% (who are making tons money on their medical stonks)???

      • cas127 says:

        “Hellcare system was allowed to become corporatized with profits at all costs…very “sick” indeed…”

        Lefty “non profit” healthcare and higher education systems are filled to the brim with rot and corruption too…the bundles of money simply get labelled “compensation” instead of “profits”.

        • Ron says:

          My niece in ne braska works overtime at75$ a hour no help wore down nurse

        • cas127 says:

          Ron,

          $75 per hour is $150k per yr, for a std 2000hr work year.

          That would put her above the 92nd percentile of all 147 million US workers earning an income.

          https://dqydj.com/income-percentile-calculator/

          Granted that is “overtime” – What is her base pay? 75k per yr?

          That is still 74th percentile.

          And the American Nurses Association says there are (and politically wields) over 4 million nurses.

      • 42 says:

        Think about your expectations one hundred years ago when there was no penicillin, no heart surgery, no shoulder or hip replacements, no gall bladder surgery, get diabetes and you die, no vaccines, small pox/polio/typhus taking there usual massive deathloads — and then complain.

        • 42 says:

          Raising a family, working class, the insurance bills you pay are crazy. The third rail of that is why?

        • 42 says:

          Wolf, delete my evening’s posts. i got a little loose there. I see they’re in moderation, just hit the delete button. Great site! Appreciate this discussion you keep going here. Regards.

        • Wolf Richter says:

          42,

          They looked OK to me — if I’m looking at the ones you meant. I didn’t delete anything.

        • Seneca’s Cliff says:

          Going back 100 years is a bit of a strawman. But if you go back to the 70’s you have all the things you speak of at sensible prices. In most cases you had private practice docs who gave better service than the “employee doc’s” you get now and the rate of hospital caused infections was lower.

      • Depth Charge says:

        “Hellcare” is right. This is a disgusting country now. Top to bottom, just a greedfest. But hey, now at least they’re sending the IRS after the little guy. What a freakin’ joke.

        • RightNYer says:

          Yep. I tell younger guys I run into who are patriotic not to even consider joining the military. For what? What country are they fighting for?

      • Augustus Frost says:

        Yet there is no way a portion of this four out of 10 aren’t wasting some or much of their money in the reported spending data.

      • nodecentrepublicansleft says:

        Plain and simple:

        It’s immoral to make money off of Grandma’s cancer.

        Everybody understands this. Someday US citizens will decide to stop accepting this horrific practice. The US Healthcare system is an international disgrace.

  7. Cem says:

    Sold my 3yr old sedan for a $2k profit and $7k total in equity and went an bought an old truck cash.

    Probably never get the chance to make that kind of deal again. No payments and cheaper insurance has been great

  8. RH says:

    This makes sense since the rising prices have made Americans more sensible, because a carefully inspected, used car was always a better investment than a new one which depreciates in value as soon as you drive it off the lot. Of course, their limited finances are also make them unable to buy many new cars, e.g., trucks whose prices have risen steeply.

    The commenters here and in other sites are really making me sad. They are like rats fighting over the few crumbs that fell off a dining room table, because they resent the minimal sums that each American received after this pandemic hit, while they are too cowardly/scared to take notice or speak about how have been defrauded out of TRILLIONS for decades by the banksters.

    This used car sales prices trend is a tiny economic signal coming out of the web that is the world economy that reveals the inflation that the “Federal” Reserve created and how it has often unexpected, side effects that rebound throughout the economy to ordinary Americans’ and Europeans’ grief. Finally(!), Americans are slowly awakening to what has been going on for decades: how they have been getting the shaft after the ultra-corrupt, ultra-rich have taken the elevator.

    Revelations are now coming out from the strangest sources. For example, in memory of my glory days, I have long watched this fellow and his buddy who used to travel around China and video record their adventures aboard their motorcycles for broadcast on youtube.

    His channel is Serpentza. He just did a video on how the corrupt CCP has been transferring out of China TRILLIONS of dollars that they have stolen out of the majority of ordinary Chinese. As discussed by Reuters in “Dirty money cost China $3.8 trillion 2000-2011: report,” this is not a new revelation but it is nice to know these facts are being noticed.

    He pointed out that in numerous English-speaking countries this has led to actual distortions in the local real estate markets. The CCP’s leaders have actually inflated the local real estate markets by buying so many houses and keeping them empty just as ways to hide and preserve their stolen wealth!

    This is something that I am very familiar with let us say, because this kind of thing has also been happening in Southern California. Since the CCP members often put these real properties in their mistresses’ and friends’ names, many amusing, potential, real estate cases may later presented to be brought to attorneys by local, CCP financial agents who are trying to recover the expensive real estate from those mistresses and friends. LOL

    It is hard to successfully convince them that they are guano out of luck. If they cannot prove the source of their illegal funds, which just arrived from other countries to purchase the real property cryptically and without witnesses to testify, or were already in the names of the mistresses and friends, the CCP members cannot prove their ownership of the real estate in a US court.

    How did the CCP members get so corrupt and clever in hiding their funds? (Clever, since eventually, many of the mistresses and friends are later intimidated in some way and just transfer the real estate back to the local, CCP agents.) Who taught them and how did the Wall Streeters and banksters become their closest allies? Read the reports as to Blackrock, Citi, Bloomberg, HSBC, and other major players getting special treatment from the CCP in China.

    Watch the documentary reports about Pandora papers and the older, Panama papers. Read about the links of the banks (meaning their controlling banksters) to organized crime.

    Read how Lucky Lucciano reportedly said in his biography in the 1930s that organized crime was already in a position then to elect a US president. Did the mafia which encyclopedias have said was later led by Meyer Lansky evaporate away like morning dew or become more cautious after its flamboyant members were incarcerated and continue to operate secretly?

    Has any other trillion (in current dollars) business evaporated away, like Amazon or Boeing or Microsoft? If a member of one of those trillionaire families was a bit of a hippy whiling away his life with drugs and prostitutes, despised his relatives (who had reportedly defrauded him of part of his inheritance), disapproved of their criminal ways, and really wanted to retaliate, he might privately tell all to a lowly servant of one of his family’s companies while drunk at an entertainment venue.

    • RH says:

      I forgot to add. My point is that we, ordinary Americans, or those who are ordinary Europeans, are not in charge. We are like fleas riding on an elephant.

      The financial powers (or rather the straw men, financial managers and leading lawyers for those financial powers, who actually do the controlling) control our economy. Until this is stopped, expect Americans’ to continue this same trend. They will become poorer and poorer in purchasing dollar terms (except where technology makes items like TVs much more expensive and would have made them much, much, less expensive if Americans were not getting robbed of their purchasing power) as the years roll by.

      I fear that too many are loyal dogs, who will just keep on taking it even as more and more of them are deprived even of the financial ability to buy themselves perks like new trucks. If you do not agree, say woof.

      • RH says:

        TYPO CORRECTION: “where advances in technology make TVs much more easy to manufacture and thereby less expensive but would have made them much, much less expensive if Americans had not been getting robbed of their purchasing power”

  9. SOL says:

    Round here in Bend most folks have multiple cars.
    His big ass American truck
    Her German SUV
    Their Mercedes Sprinter
    Then maybe a new Subaru(for when they act like outdoorsy dog people)

    Then of course there is the camper, boat and at least $20k worth of pedal bikes.

    • Depth Charge says:

      And on a median HOUSEHOLD income of $65,000. Wow, those people in Bend sure know how to LOOK wealthy. I’m betting every one of those toys is going to be taken away by the repo man when those debt-junkies start missing payments.

  10. RockHard says:

    Just checked my 3 year old car on KBB – they say I’d be able to trade in for what I paid for it and private party sale for 8-10% above what I paid. What a world. Last time it paid to get older was when I turned 25 and got a break on my car insurance.

    As far as free money, I don’t collect any directly, but I’ve been able to pick up side work like crazy, I double my income from contracting on the side the last couple of months. Someday the clouds will cover the sky, so I’m making hay while the sun shines.

    • HollywoodDog says:

      I’m up the same percentage on my 2017 Subaru. Should have bought two…

  11. David Hall says:

    Taiwan developed a vaccine and started vaccinated people. East Asia is where most of the world’s silicon chip production is. 46%-47% of the world has been vaccinated with vaccines of various efficacies.

    Virus related factory shutdowns continue in SE Asia. China needs more natural gas. China rushed to close coal power plants, rushed to build EV cars and buses, then the power shortages and black outs began. Shenzhen has 16,000 electric buses. All their buses are electric.

    • roddy6667 says:

      The buses charge the batteries at night, after they stop running and when there is plenty of electricity available. They do not contribute to the shortages. In Qingdao I can see the roof of the bus garage where all the BEV buses are on the chargers.

      • David Hall says:

        ESG people like EV conversion as a way to rely on green energy. At night when you need to charge cars, the sun does not shine. In Texas winds stalled when the temperature was 100 F as demand for air conditioning electricity was high.

        Texas wind turbines were shutdown by an ice storm in Feb. 2021. Homes, businesses and industry lost power in the resulting blackout causing pipes to freeze and system shutdowns.

  12. DR DOOM says:

    The old saw of the cure for high prices is even higher prices. Step up an see if the next sucker will pay more. Let the bidding began. I know hillbillies that have learned how to flip used vehicles . First time in their life they have finally found a way to make money on a dead expense of owning a vehicle. They don’t know that the stock market works the same way, looking for a sucker to buy a class c share for more than the last sucker. Maybe these hillbillies can apply their newly found skill set to the stock market. Nah! They will go back to digging and poaching ginseng to jack up the sex appetite of Asians when the ride is over with. Gotta know your limitations ,as a old and wise movie cop was fond of saying.

    • 42 says:

      Well said, but the old saw about higher prices being their own cure is correct, that is until Politicians step in trying to adjust the catallaxy.

    • Old School says:

      You can read many smart PhD economists, former Fed employees and respected money managers that tell how screwed the USA and nearly the whole world is by a giant debt bubble that the central banks are trapped to get us out of.

      The average Joe is driving up the price of housing and cars like they believe the narrative that future never looked better. They don’t realize the government had to save half the population when covid hit because they were going to be on the street within a few months. We have been on a 15 month sugar high as Uncle Sam borrows the citizen into a bleak future.

      • Augustus Frost says:

        If this insanity continues, the negative consequences will become readily apparent when enough of the global population can’t afford to survive due to the rising cost and availability of necessities.

        That’s when the “blowback” can’t be hidden anymore, no matter what economic gymnastics central banks and governments try.

        There is no “new normal”.

      • DR DOOM says:

        Old School: I think I will bounce the rubble you just described by adding that Keyenesan Economists have always wanted to do this even though Keyenes did not believe in it to this degree. I think Bernanke’s doctoral thesis was on the Great Depression and that Keyenseans , like Bernanke, have believed FDR did not go big enough. Keyensean Economics cannot be separated from the MMT alien virus that has infected it. “free” money from the treasury is the greatest weakness of a constitutional republic with democratic representation. I think it is decision time in our Republic.

  13. The Admiral says:

    Tulsa OK area here…

    Used low mile SUVs that sold new for 70 to 90 K are going for 20 to 30k more than new cost. Trucks were almost as bad… starting to ease a little bit

  14. Charlie says:

    Got this from the writer of a newsletter I get each day. Market is crazy :

    I sold my 2020 GMC 2500 Duramax Diesel to CarMax and made +$5,000 more than I paid for it when it was brand new. For what it’s worth, this truck mostly stayed around the house so we didn’t drive it all that much, I had just under $15k miles on it. I was surprised they gave as much as they did because the truck had a few dings and one softball size dent in the tailgate from pushing over a fence. I had no aftermarket items on the truck, it was basically the same as when I purchased it off the lot almost two years ago but with some added character, they called it body damage.

    • endeavor says:

      I sold my 2020 GMC 2500 Duramax Diesel to CarMax and made +$5,000 more than I paid for it when it was brand new. Must be nice and profitable to sell a truck like this without needing to replace it.

  15. Ron says:

    U lost money that truck is probably 85 -100 k new today u got counterfeit fiat money that’s devalued sorry for criticism

  16. Sam-I-Am says:

    Remember “Cash For Clunkers” by that idiot Obumbler?

    • Wolf Richter says:

      1. Obama or for extra credit President Obama

      2. No name calling on political figures (“idiot”)

      3. Congress passed that law, as Congress does

      • Depth Charge says:

        “2. No name calling on political figures (“idiot”)”

        I mean no offense because I really like you, but what a dumb rule. Those are the people destroying our country, yet we can’t even call them names? Pffft.

        • Wolf Richter says:

          There is a lot of disagreement on this, and I don’t want this disagreement to be carried out here, whether it’s Obama, Trump, or Biden. Lots of people here called Trump an “idiot” and much worse, and I deleted it all.

        • phleep says:

          My compliments to Wolf because this site is still about ideas, and has not degenerated into an insult-screaming match as so many have. It is easy for the whole thing to veer out of control (as have most comment sections I see now).

        • roddy6667 says:

          The buses charge the batteries at night, after they stop running and when there is plenty of electricity available. They do not contribute to the shortages. In Qingdao I can see the roof of the bus garage where all the BEV buses are on the chargers.

    • qt says:

      It’s OK to call the policy a blunder. I mean it took good, ole vehicles off the market and grossly inflated the sales of the car companies. In addition to saddling the new buyers with unnecessary debts. However, name calling is just childish here.

  17. Gary Yary says:

    The Fed will capitulate when the toast in the toaster – the toaster – the kitchen – the house – the neighborhood – the city are engulfed in flames.

    Then Central bank will convene to seek a remedy in a special session while the County burns.

    Extend that until the New Year…

    Inflation rages – stock market ATH and minimum wage above $20 per hour.

    Wow.

    President Xi might have credibility?

    Strange and epic times!

    Peace

  18. rbblum says:

    WAIT FOR IT: America’s cars and trucks will begin to resemble those in Cuba . . . though shinier and more powerful.

  19. Maximus Minimus says:

    This must present a big headache for “inflation adjusters”. They can hardly apply hedonic adjustments to used vehicles. What to do to sweep the inflation under the carpet? Expect a new cathegory soon: vintage car adjustment.

  20. Seneca’s Cliff says:

    I have feeling this will all end with a bang. Suddenly all these “price is no object” will find themselves tragically underwater on their vehicles and without the stimmies they will not be able to afford the payments. So it will be no surprise when the repo men are busier than one arm paper hangers. They will probably benefit from huge economies of scale as all the repoed cars in an entire neighborhood can be disabled at the same time,and they can bring in a full size car carrying semi to haul them away instead of using a tow truck.

  21. MCH says:

    Wolf,

    Remember how you talked about the fact that this won’t go on until there is a buyer’s strike? I would like to think that the market has already bifurcated to one where the customers are willing to pay, and industries will cater to those. And another where the buyers go on involuntary strike because the situation has changed so much that they can’t afford a car anyway.

    In turn, it’ll make ideas like robotaxi more and more popular over time and your traditional auto companies become more and more like Mercedes and BMW. Market forces is going to be wonderful for the next few years. Cruise was actually thinking they could be doing $50B (or worth $50B, not too sure with those BI articles) in a few years with robotaxis.

    • Augustus Frost says:

      I don’t believe there is a high enough population density in most of the US where robotaxis will reach any scale, even assuming the technology works well enough any time soon.

      When I travel to South America, taxis everywhere and cheap by US standards, but not for the locals where they can usually afford to pay fares for distances equivalent to those in most US cities even semi-regularly.

      • VintageVNvet says:

        We rode in cars going one way on one street then turning 180 and going back for one peso in Mexico City in 1960.
        Driver had his hand out the window with one finger extended, and ya just had to look and wave at him, get in and hand him the peso… go as far as you want, but only one that one street and one way for the peso.
        Cars were frequently full up around Paseo De La Reforma, less full farther away, etc. Folks loved us for trying to speak Spanish though obviously not locals.
        Lots of fun!

  22. josap says:

    All of the middle-class families I know are doing just fine. Good paying jobs, no problem paying the bills. Some taking advantage of the crazy RE prices by selling their starter homes turned rentals when they moved up.

    Service industry workers, retail jobs, are doing fine as well. The higher wages have put them in a better position to pay the bills without lots of stress. The child care credit also helps to afford band, sports, etc for the kids.

    The underclass will always be kept in place. It is the way of the world. And the rich will always be with us.

    • Apple says:

      That’s exactly what the rich in France thought in 1789.

      • Truckman says:

        Indeed,
        ..and Rome in 410, and Mycenae in 1189 BC, etc.
        Take living in a bubble, add Bandwagon, Egocentric, Anchoring and Confirmation biases, chuck in the Dunning-Kruger effect…Bingo!
        You cannot get people to understand when their income depends on them not understanding.
        You cannot educate people when their ignorance allows them to believe they are morally superior.
        So the collapse is always completely unexpected and everyone else’s fault.

        • phleep says:

          Regardless how the underclass got in their predicament (taking and consuming free candy while their balance sheets crumble, or whatever, and so, falling a notch economically), I think it easy to imagine they (maybe teamed with some other faction) will elect champions who will more frontally attack other parts of the government/economy. That is an easy and obvious pitch to make, politically, now. This is not the “outsider” postures of a Ronald Reagan, it is more truly combative, against the order itself. And bingo, we have an end-of-Roman-republic scenario: frontal battles between “I want it all,” fantasy-based factions (or rather, their rich figureheads). I think 2016-2020 was the USA’s first big blip in that direction. Maybe Xi is a version of that, a step away from markets to a more dictatorial model. I see it not as a reflection of confidence and strength, but of insecurity.

          As long as mass paranoia stays at the fringes, the center holds. But we are seeing it has made big inroads in the center lately. I think some folks haven’t really imagined how utterly chaotic their righteous rhetorical posing would actually play out. Essentially everyone came off the farm long ago and lives an urban-networked life. Nobody would respect a few handguns (note: every other person in the USA armed) and a gold stash. How about: car out of order, no fixes, no medical, food shortages, streets in total chaos. Would that farm with a well be safe, with mass exodus from cities? Total negative-sum game. I am saying, social order is worth a lot of mitigation now, the crafting of a path to the future other than Rambo utterances. That’s what the USA politicians need to be doing, and pretty much, given their constraints, IMO, are doing.

        • Winston says:

          “How about: car out of order, no fixes, no medical, food shortages, streets in total chaos. Would that farm with a well be safe, with mass exodus from cities?”

          Go to YouTube and watch the very first episode of the old (1970s), but excellent BBC series “Connections” by searching for James Burke Connections, Ep. 1 “The Trigger Effect”. It covers exactly that. A fascinating episode and reminds me of this from the Dilbert comic strip:

          “You’ll be sorry when the world economy collapses, but I’ll be OK because I hoarded gold at my house.”

          “On day two, you’ll trade all of it for a sandwich.”

          “Only if I’m hungry.”

          But, of course, crypto-tulip-bulbs will be even better than gold…

        • Truckman says:

          phleep.
          Well, I agree with your point about social order being worth a lot of sacrifice, and for the reasons you gave. However, firstly I don’t see anywhere in the world that voters are electing politicians who are even willing to make big enough changes, government spending being the most obvious. A big part of the problem is the number of people dependent on government spending for their jobs and/or handouts – turkeys don’t vote for Christmas. Secondly, there’s a ton of evidence that the current crop of politicians are simply not capable of fixing any big crisis without such huge expenditure of effort and money that the next crisis gets triggered by their response – Covid and the current economy being a fine example. Lastly, pointing out the current risks and advocating preparing for the worst is neither paranoia nor advocating a collapse itself. I think you are right that a lot of the worried haven’t deeply thought about what a collapse would really be like, and whether their escape would really be safe. There’s a very good series on Youtube about the Fall of Civilizations – it is indeed scary stuff. And personally I have tried to fix things, in government and politics, unsuccessfully and it nearly drove me mad. So, good luck to you if you want to try.

          Winston
          I agree – James Burke’s Connections is still excellent and well worth rewatching.

    • Yaun says:

      Those anecdotes don’t reflect what we are seeing in income share distributions. Since the 70s lower quartile has been mostly stable. Upper quartile’s share has gone up, while the middle quartiles have declined. This trend will continue and most likely even accelerate. When the poor start revolting, the rich fear for their position and make the politicians placate them. Who is paying for the transfers? So far it was foreigners buying US bonds, but that’s ending. It’s not going to be the super rich guy with his arsenal of tax consultants and offshore trusts. It’s going to be people like you and me. Unless something big changes politically, the endgame is a 3rd world society of poor and super rich with very little meat in between.

      • Harrold says:

        I think we saw the start on Jan 6th. Texas locked down its capital and had it ringed with state police after they saw what was going on in DC. The governor feared his very own supporters. He know panders directly to them.

        The question is: What will it take for the police to change sides?

  23. Depth Charge says:

    There is no greater idiot than the people paying these prices for depreciating assets.

    • MCH says:

      I’d say that would be true if people actually had a choice to not buy. Otherwise, like other critical item purchase, it might be a necessity. Imaging someone living in rural TX who has to go 30 miles each way to work daily, and his car just died permanently.

      • Depth Charge says:

        If those were the only people buying, then prices wouldn’t even be where they are today. Those people are just cannon fodder, caught up in the speculative orgy.

        • MCH says:

          I wonder. I think of a vehicle as a typical capital equipment purchase. One that last over a decade or so. It would be interesting to know how many of the people who are buying today are buying due to necessity rather than either fear (of prices exploding further) or just the idea a car is like a consumer electronic. (not many people can be this dumb, right?)

    • Truckman says:

      Are they paying them personally?

      How many are loans? If inflation does go skywards then fixed rate loans taken now get easier to repay.

      How many are company purchases?
      There’s a lot of construction guys round here who can charge what they like and have money to burn, but they do need a reliable truck and don’t have any time. So they take the truck at whatever price, and the cost justs gets put on the homebuyers’ bills. And they aren’t the only ‘boom’ job at the moment.
      One way or another, I reckon many of these super-expensive vehicles are ending up as part of general inflation for the majority.

    • Sams says:

      And at the noment the fastest depreciating asset is the US dollar.😉

  24. MF says:

    I’m not buying the free money narrative anymore. It’s too simplistic of an explanation. Sales peaked in 2016 if I recall your last article correctly, barely surpassing 2007 levels. Meanwhile the population has grown.

    I suspect there’s fresh demand in moneyed families that moved to the suburbs and rural towns. Pricing power is now taken for granted. I doubt this has very little to do with an extra $1400 burning a hole in a poor family’s pocket.

    • drifterprof says:

      MF states: “I’m not buying the free money narrative anymore. It’s too simplistic of an explanation. … I doubt this has very little to do with an extra $1400 burning a hole in a poor family’s pocket.”

      I just did a quick reread of the article because I didn’t remember Wolf implying that. Most of the article was about supply and price factors. The one statement I found about stimmies was: “They’re flush with cash from all the stimulus and cash-out mortgage refis, and from newly found wealth from the Fed’s ‘Wealth Effect’…”

      Nothing about “poor families.” As everyone knows, a lot of well-heeled and doing-okay-thankyou families got the personal stimmie payments (including me). So, IMO, it is not “too simplistic” to describe the extravaganza of various forms of covid relief stimuli (of which there were many), the cash-out refis by real estate stake-holders, and the multi-decade Fed exacerbation of the “Wealth Effect.”

      MF: “I suspect there’s fresh demand in moneyed families that moved to the suburbs and rural towns.” Objectively, it’s always better to cite some data about one’s assertion than to merely “suspect.”

    • Augustus Frost says:

      It isn’t just the $1400, not even close and it hasn’t been hard to quality for credit to buy a vehicle for years either. The rich or affluent could always afford to buy new or another vehicle.

    • gametv says:

      MF – It isnt an extra 1400 in each pocket that causes the buying demand. It is the worker who gets paid more money and feels he can spend more, it is the business owner who has more business and profits. It is like when it snows 1″ there are places where the snow accumulates due to wind that get an extra 6″ of snow.

      I think right now the bigger impact is the wealth effect, where people feel rich due to temporary asset price increases.

      • MF says:

        Workers don’t own securities in significant amounts (I’m assuming these are the assets you are referring to).

        My criticism of the free money argument is that it only gets trotted out when workers receive it, even in small amounts.

        Free money to the already-moneyed class has been set on “high” for more than a decade now, and that didn’t cause huge price jumps in cars. The only explanation that makes sense to me is a sudden new need for cars within the moneyed classes. Hence, my theory that it’s a result of the great migration to the suburbs and small towns.

        • VintageVNvet says:

          Might want to check out Wolf’s F-150 chart MF.
          Buying new pickups in 07-08 for my biz, they were MSRP low $30ks,,, now well over $45K for same or as similar as you can get these days for ”basic” vehicle.
          2007 was Chevy’s year for ”Classic” models while a new model was also available, similar to RAM in 2019, we had to buy both in 07-08 FY because of timing and Classic being sold out.
          Chevy raised the level of the bed and tailgate just enough to make it annoying, and lost a long time steady customer…

  25. Finster says:

    The return of the stock market over the same period looks pretty impressive in dollars. Not so much if you price it in cars.

    So did the stocks and cars get that much more valuable? Or did the dollars get that much less valuable?

    • drifterprof says:

      If the stock market nose-dives, and the price of cars nose-dives, would the dollar gain in value?

      Maybe not, especially if everything else was in a state of Inflate-O-Rama.

  26. otishertz says:

    All the pricing imbalances will square up in time.

    Used cars are increasing in value, which is an all time anomaly. This shows that people want, need, and use the kind of cars not being currently offered. I get the arguments about chip shortages and all that.

    People want small practical cars. That’s where the real demand is. Demand shaping through limited offerings and styles of new vehicles is obscuring the real demand from real life people.

    Not everyone is in the market for a new Subaru or Tacoma, with a Labradoodle, plastic kayak on the roof rack, and capri pants or jorts while sporting crocs.

    …and a minivan is merely a faux SUV with sliding doors and Cheerios in the cracks of the upholstery.

    • Seneca's cliff says:

      What they really want is one of those giant unfolding rooftop tents. I still don’t understand the attraction of those things.

  27. BuySome says:

    Thought I’d see if the article title could be adjusted to be slightly more attuned to a general description of this whole frontier, thus….”New nuts vehicle to a gone market in record crazy used prices spike!”

  28. Sheep street:) says:

    I treaded in my 2018 Honda civic for 11K with over 79K miles. As a curiosity, I went back to check the dealers’ lot and checked the re-sale price. They were asking almost 18K. I checked a few days ago. It is gone. I paid 18K when I bought it brand new. Most of the dealers around me have less than 50 used cars in their lot. I paid my used 2019 pick-up truck over 4K-5K KBB value. There are not enough cars, and dealers have the upper hand for now. But I need a pick-up truck and using it as a personal / work truck on the weekend to generate money; otherwise, I would not buy a car in this market.

  29. So these are cars right and the auto makers aren’t producing cars just trucks, so if you need a car its a double whammy.

    • Anthony A. says:

      Ambrose, Lots of manufacturers are producing ‘cars, except for Ford (EV Mustang excluded) and GM, that is phasing out sedans. Honda, Toyota, Nissen, Volvo, Hyundai, Kia, etc., etc, are producing many sedans and small SUVs. The storage lots are full of them. Lots of people want used cars since they typically can’t afford the new car prices or don’t want the payment.

    • Wolf Richter says:

      Ambrose Bierce,

      No. They’re a mix of cars, SUVs, compact SUVs, and pickups. The most popular rental cars are compact SUVs. Rental fleets are buying what is popular. They’re not buying a lot of cars anymore.

      Go to the website of a rental car company and see what models they rent: models in all categories! And that’s what flows into the used vehicle market.

  30. Bobber says:

    What is the profile of the car/truck buyers in this environment? I’m sure it’s all over the board, but there are likely a few themes.

    Many people buying vehicles are likely on the impulsive side and probably lacking financial background. Many have received the benefit of stimulus in the form of hard cash or elevated RE and stock prices. They lack the financial sense to know their new-found wealth could be temporary. They probably have an inkling about such dangers, but the need to spend their modest newly-gained wealth is overwhelming. I know only one person who bought one of these new vehicles recently, and the person fits this profile.

    On the other hand, there may be people with extensive financial backgrounds and lots of wealth who legitimately believe the entire economy is dependent on creating inflation, so they are making a calculated decision to buy hard assets. If stocks and RE are overpriced by 100%, a new truck that is overpriced by 30% looks relatively solid, assuming the truck provides some marginal utility or enjoyment.

    The results from this stimulus experiment were obvious and predictable. If you give stimulus to people who spend, it generates a huge amount of spending and creates inflation. If you give stimulus to wealth holders, a portion of their new wealth will be spent via wealth effect, also adding to inflation, but the majority goes into the bank.

    After seeing the recent inflationary spike, the Powers That Be will now try to manage stimulus better. It should be lessened overall. Their goal, of course, is to return to the pre-COVID kick-the-can policy (aka “Boiled Frog” economy), where inflation runs steadily at 2%, wealth concentrates, 50% of the population maintains low-paying service jobs with few benefits, and dreams of upward mobility gradually fade. This is the path that requires the least structural change and hard decision-making, and has the best of chance of getting legislators through the next four years without major disruption.

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